MCA Judgments and New York Paychecks: 6 Questions About Income Execution

Yes, a lender that holds a personal guarantee can go after part of your paycheck in New York, but only if it has already won a judgment against you. New York specifies the amounts that may be deducted, along with the processes that must be followed. An income execution goes after earnings rather than cash in the bank. Wage garnishments take a portion of the funds you earn every two weeks (or whenever you get paid). Just remember: in ordinary cases, none of that can start until after judgment.

If you signed a confession of judgment, the factor simply has to file it to obtain a New York court judgment against you. Since August 30, 2019, out-of-state debtors can no longer be subject to judgments obtained through confessions filed in New York. Instead, a confession needs to be filed in the New York county where you live or your business has a place of business. The factor has to file it within three years of the date the confession was signed.

Income Executions

If you aren’t paid regularly, or don’t have a paycheck at all, you might think you’re off the hook. Not so fast. Income executions follow specific rules. They apply to money you get from an employer - wages, salary and commissions - and to regular income from self-employment and similar work, if there is a clear payor for your work (one person or business). In some courts, income executions can be issued by the creditor’s attorney; in other courts they need to come from the clerk. Execution takes place through a sheriff or a New York City marshal.

The execution is aimed at your employer, but it starts with you. It commands you to begin paying the debt within twenty days. In theory, you can avoid the whole employer hassle by making payments directly to the sheriff. If you do, your employer will never hear about the execution. If you fail to pay up within that time, however, the Sheriff or Marshal will deliver a copy of the income execution order to your employer. Your employer also gets served with notice of the income execution if the sheriff is unable to serve you within twenty days. The purpose is to begin withholding money from your paycheck. That money then gets sent to the sheriff and later forwarded to your creditor. By law, your employer must figure out how much money to withhold and send to the sheriff every pay period and has to notify the sheriff if you leave your job. If the employer doesn’t pass on the money that gets taken from your paycheck, the creditor can go after the employer for it.

The Amount That Can Be Garnished

New York caps the amount that can be garnished from your paycheck. First, it restricts garnishment to the lower of 10 percent of your gross pay or 25 percent of what is left after taxes and other required deductions. At a minimum, you get the higher state or federal minimum wage times 30, which in 2026 is $510 in NYC, Long Island and Westchester, or $480 elsewhere in the state. That means a creditor can’t take anything out of your paycheck unless your weekly disposable income is above the floor amount. This state adds a layer of protection against your paycheck being seized. 90% of your earnings from the sixty days before the execution reaches the sheriff, and thereafter, are also exempt, unless a court finds you don’t need the income for reasonable needs of you and your dependents.

Some income can’t be seized at all. This includes Social Security and similar non-wage benefits like SSI and Veterans’ benefits. Unemployment benefits, workers’ compensation, and public assistance are similarly off-limits. IRA and qualified retirement plans are generally exempt.

At least in theory, your boss can’t make your life miserable because of your debt. The employer is forbidden from firing, laying off, disciplining, refusing to promote or refusing to hire you just because of an execution. If your employer harms you for this reason, you can go to court for lost income within 90 days.

It Ends When You Leave

Quit or get fired, and the execution is returned to the sheriff and your employer is taken off the hook. There is a glitch if the same employer hires you back within 90 days, but otherwise it ends when you leave. Note that multiple executions delivered to the same employer are to be satisfied one at a time in delivery order. A second income execution issued while the first is still active must wait until the first is fully paid. An execution is a slow way for a creditor to collect. Your creditor can also choose (or elect) to use other collection methods. These could include putting a lien on the land you own or restraining money in your bank account.

A personal guarantee can make a money judgment feel all too permanent. When execution starts, withholding continues until the money judgment is paid off. New York’s judgment rate on business debt like an MCA is generally 9 percent a year. At 10 percent of your gross pay, executions take a very long time to run out. Judgments in this state are presumed to be paid at the end of 20 years. If the creditor takes money from you, or you sign a writing acknowledging that you still owe, however, the clock resets. The creditor gets a fresh 20-year life span.

What if your financial position changes, or your employer makes things difficult? You or the creditor can ask the court to change the income execution at any time. The court can limit withholding, take away the deduction or make other adjustments. Finally, a bankruptcy filing’s automatic stay will usually stop withholding in its tracks. In theory, garnishment payments made before you file may be recoverable as preferences, but this requires jumping through a lot of hoops. A payment can only be “preferred” if it meets all the requirements of the bankruptcy code.

So what should you do? Look at the papers you’ve been served with. Don’t treat them like junk mail. You have 20 days before your employer is involved, and you should use them. In that time you can check to see if your income is exempt, or ask the court to limit the execution, or do something else to protect your paycheck.